According to tax department officials, collections this current financial year are likely to be subdued, even as economic growth climbs above five per cent.
“The tax revenue target cannot be met unless there is additional resource mobilisation. If we increase tax rates, it will lead to inflation. But if the tax target is cut, expenditure will have to be slashed so that the fiscal deficit does not widen,” said an official who did not wish to be named.
The excise and service tax rates are at 12 per cent each and might not be increased, but the Customs duty exemption oncrude oil and other tax exemptions will be reviewed. The finance ministry will try to raise more revenue from telecom spectrum and coal block sales, user charges and disinvestment.
Duty cuts on automobiles and consumer durables, announced by former finance minister P Chidambaram in his interim Budget, might not be extended beyond June, as these led to a revenue loss of Rs 500 crore a month.
“If global crude oil prices fall, the Customs duty on crude oil could be brought back. It may not be possible to restore it to the earlier five per cent. But even a one per cent increase will get us Rs 5,000 crore,” added another official asking not to be named.
Jaitley is unlikely to go by his party colleague Yashwant Sinha’s recommendation as a Parliamentary standing committee chairman to raise the income-tax exemption to Rs 3 lakh and significantly raise standard deduction. But he could slightly widen I-T slabs while retaining the 10 per cent surcharge on those earning over Rs 1 crore.
In 2013-14, when GDP grew 12.3 per cent at current prices, tax collection rose nine per cent against a Budget target of 19 per cent. This was despite measures for mobilising an additional Rs 18,000 crore. The interim Budget had no such measures but proposed a few duty cuts.
The interim Budget assumes GDP will grow 13.4 cent at current prices in 2014-15. Its 19 per cent growth target for tax collection this year is high when a new finance minister will be under pressure to clear tax refunds.
Officials said with the Supreme Court lifting the partial ban on iron ore exports from Goa and Karnataka, the exchequer would gain Rs 3,000-4,000 crore in a year. However, reports suggest mining and exports might not reach earlier levels in one year.